While major Big Box retailers have struggled to keep pace with consumer-driven demands for instant gratification, Sears Holdings has come up with new innovations to anticipate and serve shoppers with a new one-day ground delivery service supported by a dynamic DC network.

When an industry is changing rapidly, companies must adapt in order to survive. In this whitepaper, a global publisher was seeking a partner that could mitigate risk and build a platform flexible enough for their shifting customer expectations. The solution enabled the company to rewrite their operations game plan and transform their supply chain.

Join our panel of leading economic and transportation analysts as they share their exclusive insight on where rates are headed and the issues that will be driving those rate increases over the next 12 months.

In what ostensibly has become an annual piece of legislation, a bill designed to remove antitrust exemptions currently granted to the railroad industry was introduced this week.

Entitled the Railroad Antitrust Enforcement Act, S.49, the bill was introduced by Senators Herb Kohl (D-WI) and David Vitter (R-LA).

As has been the case with previous incarnations of this bill, its main objective is to bring the freight rail system under the nation’s anti-trust laws and provided needed protection for various rail customers who have suffered from increased rates and decreased quality of service, according to an April 2008 letter by seven U.S. senators to Senate Majority Leader Harry Reid.

Various industry sources have told LM in the past that under the current limited antitrust exemption, shippers cannot sue railroads over rates and must appeal cases to the Surface Transportation Board (STB).

“Under current law, the railroad monopoly is allowed to charge excessive rates and provide inferior service while rail customers are powerless to do anything,” said Glenn English, Chairman of Consumers United for Rail Equity, a coalition of freight rail customers, in a statement. “This legislation would ensure the railroads don’t get any more special treatment, and would lead to a fairer, stronger and more competitive rail industry that works to the benefit of our entire economy.”

CURE Executive Counsel Bob Szabo told LM that the two main problems with the current lack of antitrust enforcement are paper barriers—or contractual obligations incurred when short lines acquire lines from the larger, connecting carriers—and other bottlenecks that he said gives railroads an unfair and anticompetitive advantage over shippers on rates. If antitrust laws currently applied to railroads and the STB did not allow it to occur, he said these would be viewed as illegal transactions.

Even if antitrust exemptions for the railroad industry are removed, there are some that say that doing so would not necessarily make things better for shippers due to myriad factors.
According to William J. Rennicke, director of Oliver Wyman, a Boston-based management consultancy, one factor is that U.S. railroad freight rates are among the lowest in the world. Coupled with that, said Rennicke, is that the regulatory risk this measure may bring would drive private investors away from the railroad industry.

“The Department of Transportation is predicting an 88 percent increase in railroad freight tonnage by 2035,” said Rennicke. “So, if you are going to have private capital come into an industry, investors want to invest in something where they are not going to be blindsided by changes in regulatory structure.”

The Association of American Railroads (AAR) also opposed this legislation, stating that it has the potential to create an unprecedented and confusing regulatory scheme that could alter economic oversight of the railroads.
AAR President and CEO Edward R. Hamberger said that other U.S. industries—besides the railroads—operate with limited antitrust exemptions. He added that Congress has specified how to deal with the potential conflict between anti-trust law and economic regulation by an independent federal agency, except in the case of the railroad legislation being considered by the Judiciary Committee.

A Logistics Management survey of roughly 70 rail shippers found that 63 percent—or nearly 50 shippers—support the antitrust legislation, and some were succinct in describing how the industry is functioning without antitrust regulation.

“Under the present system, there is no competition by the railroads,” one rail shipper told LM. “That leads to complacency, which contributes to the poor overall service provided by the railroads. There is little interest to invest in infrastructure and capital goods by the railroad.”

About the Author

Jeff BermanGroup News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

Subscribe to Logistics Management magazine

Subscribe today. It's FREE!

Get timely insider information that you can use to better manage yourentire logistics operation.

Recent Entries

When an industry is changing rapidly, companies must adapt in order to survive. In this whitepaper, a global publisher was seeking a partner that could mitigate risk and build a platform flexible enough for their shifting customer expectations. The solution enabled the company to rewrite their operations game plan and transform their supply chain.

While it is already reaping myriad benefits from ORION (On-Road Integrated Optimization and Navigation), a proprietary routing platform for its drivers rolled out in late 2013, transportation and logistics bellwether UPS announced big plans for the technology this week.